How to Lower Your Car Payment

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Even with poor credit.

By

Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - March 16, 2020

If your monthly car payment is crunching your budget or you want more disposable income during the month, refinancing your auto loan could be the solution to lowering your car payment.

Refinancing to Lower Your Monthly Payment

Refinancing can be thought of as redoing your auto loan and changing some of the original terms. You can either choose to refinance with your original lender, or find a new one. Hoping to lower your car payment is typically the only reason you should refinance an auto loan. There are two ways that you can do this:

  • Extend your loan term – By extending your loan term, you stretch the amount of time you're paying for the car. This means paying more in interest charges, as you’re going to be making payments for a longer period of time.
  • Get a lower interest rate – If your credit score has increased since the start of your car loan, you may qualify for a lower interest rate. Doing so lowers your monthly payment and the overall amount you pay because it leads to decreased interest charges.

In order for you to refinance your auto loan, you and your vehicle all have to meet the lender’s refinancing requirements. The credit requirements and loan limits vary, so you may have to shop around for a lender that can work with your unique situation.

Before You Can Refinance an Auto Loan

When you apply for refinancing on your car loan, most lenders require you to meet these qualifications before they consider you for refinancing:

  • Your credit has improved – Refinancing is usually reserved for those with good credit. However, if you started with a bad credit car loan and your credit score has improved, you may be eligible for refinancing.
  • Car loan at least one year old – If you took out a bad credit auto loan, lenders typically require you to have had your loan for at least one year, if not two. If your car loan is only a few months old, your chances of refinancing are slim because you lack a real payment history on the loan.
  • Vehicle has to have equity – If you’re upside down on the loan, you can’t refinance because your vehicle is worth less than what you owe. Check your loan amount and the actual cash value of your car to see if you have equity before attempting to refinance.
  • You’re current on payments – In order to be considered, you must be current on your payments and have a good payment history. If you have missed or late payments, they have to be resolved before asking a lender to refinance your loan.
  • Your car must qualify – Each lender has their own set of requirements your vehicle must meet in order to qualify for refinancing, such as being within a certain age and mileage range.
  • Your loan must qualify – Lenders can only refinance loans that fall within a certain range, as well. If you owe too much or too little on your auto loan, it may not qualify for refinancing.

Many of the requirements for refinancing take time and patience. If you can’t wait, there are other options besides refinancing.

If You Can’t Refinance …

There are a few other options for those who are experiencing problems and may not qualify for refinancing. The first thing you can try is simply talking to your lender and seeing if they can help. Let them know you’re worried about falling behind on payments – the worst they can say is no. Additionally, trading the vehicle in for something more affordable is also a viable option.

Once you get behind on payments, it can really start to harm your credit score, making it harder to get an auto loan in the future. If you default on the loan, you’re risking repossession and major damage to your credit. Once you start missing payments, it becomes an uphill battle.

If you have bad credit, and it’s getting hard to keep up with your payments, we want to help. At CarsDirect, we've teamed up with dealerships around the country that offer special financing for those with bad credit, and other unique credit situations. To see if we can find a dealer in your area that may be able to lend a hand, simply fill out our free car loan request form.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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